Work-style reform legislation

A package of work-style reforms, which Prime Minister Shinzo Abe says is at the top of his agenda for this legislative session, will soon be on the way to the Diet for deliberations. It will feature the introduction of the first-ever legal cap on overtime hours, rules aimed at establishing the “equal work, equal pay” principle by improving working conditions for people with irregular job statuses and a new system that allows some corporate employees to be paid on the basis of their performance rather than hours spent in the workplace. The legislation, expected to be approved by the Cabinet and submitted to the Diet by the end of this month, marks an important first step, but it needs to be backed up by further efforts for the measures to have the intended effects.

The government views work-style reform as a solution to many of the problems that confront Japan’s economy. Curbing the chronically long working hours of company employees through tightened regulations on overtime, with provisions for penalties on violators, is hoped to promote a better work-life balance among workers and encourage more women and the elderly to join the workforce — thus alleviating the manpower shortage as the nation’s working-age population declines. Narrowing the wide disparity in wages and other conditions between regular full-time employees and irregular workers such as part-timers and term-contract workers, who have come to account for 40 percent of the labor force, will hopefully enhance the latter’s morale and productivity. Increased wages for those workers will raise their purchasing power and contribute to consumer spending, whose growth remains weak despite an extended growth of the economy.

It would be premature, however, to assume that the legislation alone will realize such a scenario. It is the first time since the Labor Standards Law was introduced seven decades ago that an upper limit will be placed on workers’ monthly overtime hours; currently, how much overtime is allowed for workers during busy seasons is left to an agreement between management and labor unions at each firm. The prime minister emphasizes his resolve to “never repeat the tragedies” of karōshi (death from overwork) or suicides of over-stressed workers through the reform. But the upper limit under the legislation was set at a maximum of “less than 100 hours” a month — a level at which death can be linked to overwork — following negotiations among the government and representatives from business and labor circles.

Today, people on irregular job contracts typically earn about 60 percent of the hourly wage of regular full-time employees — compared with 70 to 80 percent in many European economies. To narrow the gap, the government in late 2016 unveiled a draft guideline showing examples of “irrational” discrimination in wages and welfare benefits on the basis of employment status that should be eliminated. But whether such measures will effectively improve conditions for workers with an irregular status will depend on efforts by private sector firms.

The government’s work-style reform package also introduces a new “highly professional” work system, under which overtime regulations can be lifted on people engaged in certain jobs requiring specialized skills, such as financial dealers or people in research and development, who earn ¥10.75 million or more a year. Also included in the package will be expanding the scope of jobs that can be covered by the so-called discretionary labor scheme, in which people would be paid a pre-fixed amount for the hours they are presumed to spend on the job — instead of the hours they have actually spent. Both systems, the government says, reward workers on the basis of performance instead of hours. Proponents of these systems say this makes sense because productivity of white-collar workers cannot be gauged by time in the office and that lifting work-hour regulations can add to efficiency. Opponents such as labor unions and opposition parties charge that people could end up working longer hours without extra pay.

Critics say the legislation is short on steps to protect workers’ health and long on measures reflecting the interests of employers. Such criticism has been fueled by the Health, Labor and Welfare Ministry’s recent move to seek revisions to the planned legislation that would delay implementation of the overtime hour regulations for small and medium-size firms by a year — to April 2020 — in response to a request from the Liberal Democratic Party, which was acting on complaints from such firms that they cannot secure enough labor to run their business if the overtime regulation is imposed amid the tightening labor shortage.

What needs to be done to ensure that the planned reform will have the desired benefits should be sufficiently discussed in the Diet.